The thing is though. Bioware or Obsidian or whoever LucasArts got to make the game would have a huge amount of work cleaning up the mess left by kotor 2. Let's face it, kotor 2 had a great begginning, a good middle, then it dropped off a cliff into fire. It wasn't finished and left huge holes in the storyline. There would be more work than worth to make a game good enough to make people overlook all the problems with their previous game. In the end it all comes down to money both LucasArts and Bioware saw that this MMO would bring more money for as long as it was afloat than kotor3, simply due to the fact that people that wouldn't only be drawn from the pool who had played 1 and 2. It wouldn't draw in as many new customers as TOR and greed won out. It sucks yes but that's how life is. Honestly i've been able to go through 1 and 2 only once each due to the amount of bugs and incompatibility. I'm very happy with the way this game turned out and no one will change my mind otherwise.
Have you played Kotor 2 with the restoration mod?
Kotor 2>Kotor 1